Assignments page 66
1. Explain the law of demand? Other things equal, as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. Why does a demand curve slope downward? reflect the law of demand- people buy more of a product, service, or resource as its price falls. How is a market demand curve derived from individual demand curves? By adding the quantity demanded by all consumers at each of the various possible prices, we can get from individual to market demand
2. What are the determinants of demand? (1) Consumers' taste (preferences), (2) the number of buyers in the market, (3) consumers' incomes, (4) the prices of related goods , and (5) consumer expectations. What happens to the demand curve when any of these determinants change? The demand curve will shift to the right or left. Distinguish between a change in demand and a movement along a fixed demand curve, nothing the cause(s) of each. A change in demand is a shift of the demand curve; a change in quantity is a movement from one point to another on a fixed demand curve.
3. What effect will each of the following have on the demand for small automobiles such as the Mini-Cooper and Smart car? LO1 •
a.Small automobiles become more fashionable.
b.The price of large automobiles rises (with the price of small autos remaining the same). •
c.Income declines and small autos are an inferior good.
d.Consumers anticipate that the price of small autos will greatly come down in the near future. •
e.The price of gasoline substantially drops.
4. Explain the law of supply. As price rises, the quantity supplied rises; as price falls, the quantity supplied falls. Why does the supply curve slope upward? The upward slope of the curve reflects the law of supply- producers offer more of a good, service, or resource for sale as its price rises. How is the market supply curve derived from the supply curves of individual producers? Market supply is derived from...
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